- 13 Apr, 2018

What’s the Average Australian Home Loan Size?

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The average Australian home loan size has grown considerably over the last 20 years. As home prices skyrocket and housing affordability decreases, more home loan holders are making minimum home loan repayments. This situation has financial experts questioning if too many Australians are over-committed financially and are under mortgage stress.


To understand how the average Australian home loan size has grown, let’s wind the clock back.

The Historical Growth of the Average Australian Home Loan Size

Australian Bureau of Statistics - logo

According to the Australian Bureau of Statistics (ABS), back in 1975, the average Australian home loan size nationwide was just $17,400. However, just 10-years later in 1985, the average sized home loan had increased to $41,800. By 1995, the average mortgage sizes in Australia jumped to $95,600, and by 2005 to $277,500. By 2015, the average Australian home loan size had reached $382,400. Today’s national average home loan hovers around $400,000.

So, how does the national average compare to state averages?

On a state-by-state basis, New South Wales (N.S.W) and Victoria (VIC) have typically always had the highest average home loan size, and Tasmania (TAS) the lowest. The average home loan sizes for these states between 1975 and 2018, according to the Australian Bureau of Statistics (ABS), are as follows:

Average Home Loan Size
NSW VIC TAS
1975 $18,600 $16,200 $15,900
1985 $46,600 $40,900 $30,100
1995 $114,500 $85,700 $70,200
2005 $262,300 $209,000 $153,300
2015 $454,200 $387,600 $236,400
2018 $456,100 $396,500 $242,100

Source: ABS

 

How Much Does the Average Australian Need to Earn to Cover the Average Mortgage Cost?

Based on data, financial experts believe that some buyers are better-off than others when it comes to buying property. For instance, the median price of homes in Sydney are far greater than homes in Adelaide, and this can mean the difference between a home loan being manageable or a burden.

CoreLogic_RP-Data_Logo

For the average Australian buying a home in Sydney, which has a median home price of $880,743, according to CoreLogic RP Data, they need to be earning more than $154,482 before tax a year. These figures, however, only apply to house hunters seeking to buy outside of the CBD. If they’re seeking to buy in an inner-city location, then the median price jumps to over $1 million. Therefore, these buyers will need a higher average income to cover costs. For those seeking to buy a unit in Sydney, the average earnings per year are more than $115,000.

Minimum Average Earnings Needed in Australian Capitals to Cover Average Mortgage Costs
Capital City Home Median Earnings per Annum Unit Median Earnings per Annum
Sydney $880,743 $154,482 $760,814 $115,862
Canberra $588,616 $106,666 $430,802 $76,689
Darwin $426,421 $105,792 $342,646 $84,597
Melbourne $723,334 $104,643 $575,204 $86,436
Perth $464,474 $101,149 $403,921 $80,000
Brisbane $491,850 $89,655 $383,007 $73,011
Adelaide $433,354 $77,241 $332,778 $62,528
Hobart $416,840 $64,827 $341,686 $50,574

Source: CoreLogic RP Data

 

These figures are based on an interest rate of 5.61% p.a. and a 20% deposit. Today, the average standard variable home loan rate for many lenders hovers around 4.00%.

What's my borrowing power if I earn $ per year?

What is Mortgage Stress?

For those of you who are wondering, mortgage stress typically occurs when your home loan repayment is more than 30% of your income.

According to recent mortgage research, some 921,000 Australian households were currently under mortgage stress. This figure rose by just under 10,000 households when compared to the previous month. On average, this figure represents 29.7% of Australian households.

Australian households under extreme mortgage stress also rose from 3,000 homes to 24,000. Many of these were in states with higher medians, such as New South Wales and Victoria. Data suggests that New South Wales had the highest level of mortgage stress with the number of households rising to 258,572 up from 251,576.

Mortgage stress contributes to the rise in minimum home loan repayments. According to research, more Australian mortgage holders are now only making a minimum repayment on their home loan, despite home loan interest being at historic lows.

One of Australia’s largest banks stated that the average monthly mortgage payments in Australian capitals range from $1,500 to over $3,000. Sydney had the highest average monthly repayment at $3,031 per month. The lowest average mortgage repayment of $1,587 occurred in Hobart, followed by $1,971 in Adelaide. The average monthly mortgage payment made in these cities were 19.4% and 21.9% of household disposable income (HDI) respectively, whereas Sydney was close to 27%.

whats-the-average-australian-home-loan-size?

These figures have prompted financial advisors to warn Australians about over-committing themselves financially. Otherwise, there could be repercussions when home loan interest rates rise. At present, Australia has the lowest home loan rates ever seen, and they have been this way for over three years. As a result, many financial experts feel that home loan holders have become a little too complacent about home loan interest and that they are optimistic that rates won’t rise. This scenario, say experts, is a dangerous mindset that could be costly long-term, especially if home loan holders don’t have a financial buffer to cover rising expenses.

Reducing the Average Australian Home Loan Size

The best way to reduce your mortgage commitment and any possibility of mortgage stress is to pay as much as possible off your home loan while interest rates are low. It’s also important for you not to commit yourself to too many other large financial purchases, such as buying a car, if you don’t need to.

Smart budgeting and spending money only when you need to will allow you to pay more off your home loan faster, and to reduce your overall debt. Overall, less debt means less stress.

Are you interested in knowing more about how to pay your home loan off faster? Then contact eChoice, we can help you find a cost-effective home loan to suit your individual needs.

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Average property price
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Average loan amount
$800,000
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$60,000
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$2,400
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This information is a guide only and is an estimate only based on the past 12 months of aggregated online mortgage enquiries from eChoice and partner programs.

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